Retail Supplier To Acquire Provider of Home Water Filtration Technology
September 10, 2018 Email This Story Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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-- Strategic acquisition advances Just Energy’s transformation to a value-added consumer products provider
-- Diversifies Just Energy’s product mix with non-commodity product and service offerings
-- Recurring, subscription based home services model with sticky customer base
-- The Acquisition is expected to be immediately accretive to Base FFO, with additional accretion post synergies
-- Transaction consideration contingent on value creation and growth
Just Energy Group Inc. announced that it has entered into an agreement to acquire Filter Group Inc., a provider of subscription based, home water filtration systems to residential customers in Canada and the United States, for $15 million in cash consideration, the assumption of approximately $22 million of Filter Group debt, and future performance based earn-out payments (all $ Canadian)
Headquartered in Toronto, Ontario, Filter Group currently provides under counter and whole home water filtration solutions to residential markets in the Provinces of Ontario and Manitoba and the States of Nevada, California, Arizona, Michigan and Illinois, with over 30,000 customers to date.
Pursuant to the purchase agreement (the “Purchase Agreement”), Just Energy will acquire all of the issued and outstanding shares of Filter Group and the shareholder loan owing by Filter Group. In addition to the assumption of approximately $22 million of third party Filter Group debt, the aggregate consideration payable by Just Energy under the Purchase Agreement is comprised of: (i) $15 million in cash, fully payable within 180 days of closing; and (ii) earn-out payments of up to 9.5 million Just Energy common shares (with up to an additional 2.4 million Just Energy common shares being issuable to satisfy dividends that otherwise would have been paid in cash on the Just Energy shares issuable pursuant to the earn-out payments (the “DRIP Shares”), subject to customary closing adjustments. The earn-out payments are contingent on the achievement by Filter Group of certain performance based milestones specified in the Purchase Agreement in each of the first three years following the closing of the Transaction. In addition, the earn-out payments may be paid as to 50% in cash and the DRIP Shares as to 100% in cash, at the option of Just Energy. Closing of the acquisition is expected to occur on or about October 1, 2018 and is subject to the satisfaction or waiver of a number of conditions customary in acquisition transactions of this nature, including the approval of the Toronto Stock Exchange and the New York Stock Exchange to list the Just Energy common shares issuable pursuant to the Transaction.
Patrick McCullough, Just Energy’s President and CEO, stated, “Over the past 18 months, Just Energy has been surveying its customers to better understand the products and services that they value. At the top of the list were products that provide health, well-being and comfort, including water filters. We have listened to our customers and the acquisition of Filter Group is a significant step by Just Energy in its transformation to a value-added consumer products company.”
Mr. McCullough added, “This strategic acquisition is expected to allow Just Energy to achieve profitable customer growth through differentiated value-added products, and diversify its product mix with non-commodity products and services offerings.”
Mr. McCullough continued, “The Transaction has been structured in a manner that allows Just Energy to realize an attractive upfront purchase price for the existing Filter Group business on the closing of the Transaction. In addition to being highly strategic for Just Energy, the earn-out structure has been designed so that the majority of the purchase price becomes payable only in the event that Filter Group is able to deliver on predetermined growth targets that would see significant value created for Just Energy shareholders and is expected to be immediately accretive to Just Energy’s Base FFO.”
Daniel MacDonald, CEO of Filter Group, stated, “I am very excited for Filter Group to join the Just Energy group of companies and help drive the transition to consumer products. With Just Energy acquiring Filter Group’s product suite and platform, we are looking to replicate Just Energy’s historical success growing, and eventually selling, National Home Services in Ontario, with the added benefit of our product offering not being limited to Ontario. We look forward to the cross selling opportunity and leveraging Just Energy’s 1.5 million consumer customers, while also providing expansion opportunities in non-regulated domestic and global markets.” Daniel MacDonald will remain employed as the CEO of Filter Group post-closing.
Mr. MacDonald, who is also the majority shareholder of Filter Group, is the son of the Executive Chair of Just Energy. Accordingly, although the Executive Chair does not have any direct or indirect interest in Filter Group, Just Energy’s Executive Chair recused herself from the negotiations and the decision making processes with respect to the Transaction. The Transaction was overseen by the Strategic Initiatives Committee of Board of Directors of Just Energy (the “SIC”), which is comprised entirely of independent members of the Board of Directors, and received the SIC’s unanimous support. The SIC received financial advice and an opinion from its financial advisor, National Bank Financial Inc., that as of the date thereof and subject to the assumptions, limitations and qualifications set forth therein, the consideration payable by Just Energy pursuant to the Transaction is fair, from a financial point of view, to the Company.